Lee said that if mainland China permits the present situation to continue, it would be giving Republic of China President Chen Shui-bian a chance to deny Beijing's "one China" policy.

Lee made the remarksDec 1 in an exclusive interview with the Hong Kong-based satellite TV channel.

Lee said he believes that President Chen Shui-bian will further promote Taiwan's position in the international community and offer economic assistance to poor countries so as to obtain their diplomatic recognition and support, but mainland China's growing economic power will eventually defeat Taiwan in the diplomatic arena.

Asked about whether Taiwan will relax its "no hurry, be patient" policy restricting investment in mainland China after Beijing gains entry into the World Trade Organization (WTO), Lee said that Taiwan is already prepared to abandon that policy, and is only awaiting an ease in cross-strait tensions.

All of the enterprises in Taiwan hope that the government will relax the policy as soon as possible, so as to enable them to make meaningful investments in mainland China, Lee said.

If the policy is not changed, Taiwan businessmen should invest in mainland China through third countries such as the United States, Hong Kong and Japan, Lee suggested. He added that investment in mainland China will have complementary benefits for economic entities across the Taiwan Strait.

Taiwan investors have chosen mainland China of the familiar customs and language in that country, not to mention lower costs of labor, electricity and water, Lee noted.

Lee also forecasted that the economy of Taiwan will not crash, but still needs to be watched for a while. Although Taiwan's stock index and real estate prices have declined, and domestic banks are holding huge amounts of opverdue loans, the situation is not as bad as expected, Lee said. He added that the situation will make a turn for the better when cross-strait relations have settled.

Asked whether the new US president will change US policy on the Taiwan Strait issue, Lee said that no matter who becomes the next US president, that nation's "China policy" will remain unchanged.